Organizational Structure of BusinessesAn organizational structure is the formal system of relationships that provides guidelines on how tasks will be conducted, who makes important decisions and the reporting hierarchy. Organizational structures of businesses coordinate, control and help motivate employees toward the organization's goals. The most common business structures include functional, divisional, matrix, hierarchical and horizontal.

SignificanceThe organizational structure of a business affects workplace culture, employee motivation, performance and cooperation. Selecting the correct structure that compliments your business goals and objectives can positively affect employee behaviors and attitudes, as well as lead to more effective teamwork and networking opportunities that build stronger worker relationships throughout the company. Planning and implementing an organizational structure will help determine the necessary workforce talent to build a successful business.

Functional StructureA functional organizational structure is based on job functions. Grouping employees by the positions they hold, tasks they perform or skills they use is the simplest form of organizational structure and allows for better communication between specialists. "Functional organizations have the advantage of being simple to understand with clear lines of command, specified tasks and responsibilities," according to Alan Price's book, "Human Resource Management in a Business Context." A functional structure can lead to more effective teamwork and cooperation within specific divisions but can also cause a mindset of us vs. them between different divisions within the...

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